Brijesh Kumar v. Santosh Kumar Singh

Delhi High Court · 12 Sep 2018 · 2018:DHC:5892

Mukta Gupta

CRL.A. 405/2017

2018:DHC:5892

criminal appeal_allowed Significant

AI Summary

The Delhi High Court set aside the acquittal and convicted the respondent under Section 138 NI Act, holding that the statutory presumption of debt was not rebutted and admissions proved liability.

Full Text

CRL.A. 405/2017
HIGH COURT OF DELHI

Reserved on: 5th March, 2018

Date of Decision: 12th September, 2018

CRL.A. 405/2017
BRIJESH KUMAR ..... Appellant Represented by: Mr. Sanjay Bhardwaj, Adv.

VERSUS

SANTOSH KUMAR SINGH ..... Respondent Represented by: Mr. Rajesh Kumar, Mr. Avinash Kumar, Advs.

CORAM:

HON'BLE MS. JUSTICE MUKTA GUPTA

JUDGMENT

1. The present appeal is directed against the judgment dated 12th October, 2015 passed by the learned Metropolitan Magistrate in CC No.868/2013, titled as ‘Brijesh Kumar v. Santosh Kumar Singh’, whereby the said complaint preferred by the appellant under Section 138 of the Negotiable Instruments Act, 1881 (in short ‘NI Act’) was dismissed and the respondent/accused was acquitted.

2. Briefly, the facts as per the appellant are that the respondent approached the appellant in April, 2013 for a friendly loan of ₹14,40,000/due to his emergent need. Appellant advanced the aforesaid loan with an interest @ 10%. However, the respondent failed to make the payment despite repeated reminders. In July, 2013, respondent issued a cheque bearing No. 12282 dated 8th July, 2013 drawn on Union Bank, Sundar Nagar for ₹14,40,000/- in favour of the appellant. Aforesaid cheque was returned vide return memo dated 27th August, 2013 with endorsement "Funds Insufficient". Despite legal notice dated 14th September, 2013, the 2018:DHC:5892 respondent did not make any payment in discharge of his liability. Thus, the complaint was preferred.

3. Pre-summoning evidence was closed vide order dated 11th December,

2013. Notice under Section 251 Cr.P.C. was framed on 20th March, 2014 to which the respondent pleaded not guilty and claimed trial.

4. Appellant was examined as CW-1. He reiterated the contents of the complaint in his evidence by way of affidavit vide Ex.CW-1/A. The complaint was proved vide Ex. CW-1/6, original cheque bearing No.12282 dated 8th July, 2013 vide Ex. CW-1/1, return memo dated 27th August, 2013 as Ex.CW-1/2, legal notice dated 14th September, 2013 as Ex.CW-1/3, original postal receipt as CW-1/4 and net tracking report as Ex.CW-1/5.

5. To prove the source of funds for advancing the loan to the respondent, appellant examined two more witnesses namely Devender Singh (CW-2) and Raj Kumar (CW-3).

6. Devender Singh in his affidavit by way of affidavit (Ex.CW-2/1), stated that he was the cousin brother of Brijesh Kumar. That built up property bearing No. C-26B on a land area measuring 40 sq. yards i.e. 33.44 mtrs situated in abadi land of Mandawali Unchepur was sold to Smt.Krishna Devi and part sale proceeds of the said property went to the share of Brijesh Kumar by way of family partition. The said property was sold for a sum of ₹22 lakhs. Out of total sale proceeds, ₹8 lakhs was received vide cheque No.162130 dated 11th April, 2011 drawn on State Bank of India, ₹5 lakhs was received vide cheque No. 432498 dated 11th April, 2011 drawn on Punjab National bank and balance of ₹9 lakhs was given in cash. Aforesaid cheques were proved vide Ex.CW-2/B.

7. Raj Kumar in his evidence by way of affidavit (Ex.CW-3/1), stated that he was one of the attesting witnesses of all the documents executed between Devender Singh and Smt. Krishna Devi. He corroborated the version of Devender Singh.

8. Respondent, in his statement under Section 313 Cr.P.C. denied taking any loan of ₹14,40,000/- from the appellant. He also stated that the cheque in question was issued to the appellant as security for two committees which were being run by the appellant for a sum of ₹6,00,000/- each about 3 years ago approximately and he had given the cheque in blank signed condition.

9. Respondent examined himself as DW-1 wherein he reiterated the defence taken by him in his statement recorded under Section 313 Cr.P.C.

10. Learned counsel for the appellant submits that the capacity to pay loan has been duly proved. Appellant's uncle's son i.e. Devender Singh gave loan to the appellant which he gave to the respondent. Nothing has been elicited from the cross-examination of Devender Singh and Raj Kumar. The text message wherein the respondent admitted owing money to the appellant is exhibited as Ex.CW-1/7 which document has been admitted by the respondent in his cross-examination.

11. On the other hand, learned counsel for the respondent submits that there are contradictions in the stand taken by the appellant and Devender Singh. No sale deed has been produced, thus it cannot be said that appellant had the financial capacity to give loan.

12. Hon'ble Supreme Court in the decision reported as (2010) 11 SCC 441 Rangappa v. Sri Mohan discussed at length the scope and legislative intent of Sections 118, 138 & 139 of the NI Act as under:

17. In the course of the proceedings before this Court, the contentions related to the proper interpretation of Sections 118(a), 138 and 139 of the Act. Before addressing them, it would be useful to quote the language of the relevant provisions:

“118. Presumptions as to negotiable instruments.—

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Until the contrary is proved, the following

presumptions shall be made:

(a) of consideration: that every negotiable instrument was made or drawn for consideration, and that every such instrument when it has been accepted, endorsed, negotiated or transferred, was accepted, endorsed, negotiated or transferred for consideration; *** 138. Dishonour of cheque for insufficiency, etc., of funds in the account.—Where any cheque drawn by a person on an account maintained by him with a banker for payment of any amount of money to another person from out of that account for the discharge, in whole or in part, of any debt or other liability, is returned by the bank unpaid, either because of the amount of money standing to the credit of that account is insufficient to honour the cheque or that it exceeds the amount arranged to be paid from that account by an agreement made with that bank, such person shall be deemed to have committed an offence and shall, without prejudice to any other provision of this Act, be punished with imprisonment for a term which may extend to two years, or with fine which may extend to twice the amount of the cheque, or with both: Provided that nothing contained in this section shall apply unless—

(a) the cheque has been presented to the bank within a period of six months from the date on which it is drawn or within the period of its validity, whichever is earlier;

(b) the payee or the holder in due course of the cheque, as the case may be, makes a demand for the payment of the said amount of money by giving a notice in writing, to the drawer of the cheque, within thirty days of the receipt of information by him from the bank regarding the return of the cheque as unpaid; and

(c) the drawer of such cheque fails to make the payment of the said amount of money to the payee or as the case may be, to the holder in due course of the cheque within fifteen days of the receipt of the said notice. Explanation.—For the purposes of this section, ‘debt or other liability’ means a legally enforceable debt or other liability.

139. Presumption in favour of holder.—It shall be presumed, unless the contrary is proved, that the holder of a cheque received the cheque, of the nature referred to in Section 138 for the discharge, in whole or in part, of any debt or other liability.”

18. Ordinarily in cheque bouncing cases, what the courts have to consider is whether the ingredients of the offence enumerated in Section 138 of the Act have been met and if so, whether the accused was able to rebut the statutory presumption contemplated by Section 139 of the Act. With respect to the facts of the present case, it must be clarified that contrary to the trial court's finding, Section 138 of the Act can indeed be attracted when a cheque is dishonoured on account of “stop payment” instructions sent by the accused to his bank in respect of a post-dated cheque, irrespective of insufficiency of funds in the account. This position was clarified by this Court in Goaplast (P) Ltd. v. Chico Ursula D'Souza [(2003) 3 SCC 232: 2003 SCC (Cri) 603], wherein it was held: (SCC pp. 232g-233c) “Chapter XVII containing Sections 138 to 142 was introduced in the Act by Act 66 of 1988 with the object of inculcating faith in the efficacy of banking operations and giving credibility to negotiable instruments in business transactions. The said provisions were intended to discourage people from not honouring their commitments by way of payment through cheques. The court should lean in favour of an interpretation which serves the object of the statute. A post-dated cheque will lose its credibility and acceptability if its payment can be stopped routinely. The purpose of a post-dated cheque is to provide some accommodation to the drawer of the cheque. Therefore, it is all the more necessary that the drawer of the cheque should not be allowed to abuse the accommodation given to him by a creditor by way of acceptance of a post-dated cheque. In view of Section 139, it has to be presumed that a cheque is issued in discharge of any debt or other liability. The presumption can be rebutted by adducing evidence and the burden of proof is on the person who wants to rebut the presumption. This presumption coupled with the object of Chapter XVII of the Act leads to the conclusion that by countermanding payment of post-dated cheque, a party should not be allowed to get away from the penal provision of Section 138 of the Act. A contrary view would render Section 138 a dead letter and will provide a handle to persons trying to avoid payment under legal obligations undertaken by them through their own acts which in other words can be said to be taking advantage of one's own wrong.”

19. It has been contended on behalf of the appellant-accused that the presumption mandated by Section 139 of the Act does not extend to the existence of a legally enforceable debt or liability and that the same stood rebutted in this case, keeping in mind the discrepancies in the complainant's version. It was reasoned that it is open to the accused to rely on the materials produced by the complainant for disproving the existence of a legally enforceable debt or liability. It has been contended that since the complainant did not conclusively show whether a debt was owed to him in respect of a hand loan or in relation to expenditure incurred during the construction of the accused's house, the existence of a legally enforceable debt or liability had not been shown, thereby creating a probable defence for the accused.

20. The counsel appearing for the appellant-accused has relied on a decision given by a Division Bench of this Court in Krishna Janardhan Bhat v. Dattatraya G. Hegde [(2008) 4 SCC 54: (2008) 2 SCC (Cri) 166], the operative observations from which are reproduced below: (S.B. Sinha, J. at SCC pp. 61-63, paras 29-32 & 34)

“29. Section 138 of the Act has three ingredients

viz.:

(i) that there is a legally enforceable debt;

(ii) that the cheque was drawn from the account of bank for discharge in whole or in part of any debt or other liability which presupposes a legally enforceable debt; and

(iii) that the cheque so issued had been returned due to insufficiency of funds. 30. The proviso appended to the said section provides for compliance with legal requirements before a complaint petition can be acted upon by a court of law. Section 139 of the Act merely raises a presumption in regard to the second aspect of the matter. Existence of legally recoverable debt is not a matter of presumption under Section 139 of the Act. It merely raises a presumption in favour of a holder of the cheque that the same has been issued for discharge of any debt or other liability. 31. The courts below, as noticed hereinbefore, proceeded on the basis that Section 139 raises a

presumption in regard to existence of a debt also. The courts below, in our opinion, committed a serious error in proceeding on the basis that for proving the defence the accused is required to step into the witness box and unless he does so he would not be discharging his burden. Such an approach on the part of the courts, we feel, is not correct.

32. An accused for discharging the burden of proof placed upon him under a statute need not examine himself. He may discharge his burden on the basis of the materials already brought on record. An accused has a constitutional right to maintain silence. Standard of proof on the part of an accused and that of the prosecution in a criminal case is different. ***

34. Furthermore, whereas prosecution must prove the guilt of an accused beyond all reasonable doubt, the standard of proof so as to prove a defence on the part of an accused is ‘preponderance of probabilities’. Inference of preponderance of probabilities can be drawn not only from the materials brought on record by the parties but also by reference to the circumstances upon which he relies.” (emphasis supplied)

21. Specifically in relation to the nature of the presumption contemplated by Section 139 of the Act, it was observed: (Krishna Janardhan Bhat case [(2008) 4 SCC 54: (2008) 2 SCC (Cri) 166], SCC p. 66, para 45)

“45. We are not oblivious of the fact that the said provision has been inserted to regulate the growing business, trade, commerce and industrial activities of the country and the strict liability to promote greater vigilance in financial matters and to safeguard the faith of the creditor in the drawer of

the cheque which is essential to the economic life of a developing country like India. This, however, shall not mean that the courts shall put a blind eye to the ground realities. Statute mandates raising of presumption but it stops at that. It does not say how presumption drawn should be held to have rebutted. Other important principles of legal jurisprudence, namely, presumption of innocence as human rights and the doctrine of reverse burden introduced by Section 139 should be delicately balanced. Such balancing acts, indisputably would largely depend upon the factual matrix of each case, the materials brought on record and having regard to legal principles governing the same.”

22. With respect to the decision cited above, the counsel appearing for the respondent claimant has submitted that the observations to the effect that the “existence of legally recoverable debt is not a matter of presumption under Section 139 of the Act” and that “it merely raises a presumption in favour of a holder of the cheque that the same has been issued for discharge of any debt or other liability” (see p. 62, para 30 in Krishna Janardhan Bhat [(2008) 4 SCC 54: (2008) 2 SCC (Cri) 166] ) are in conflict with the statutory provisions as well as an established line of precedents of this Court. It will thus be necessary to examine some of the extracts cited by the respondent claimant. For instance, in Hiten P. Dalal v. Bratindranath Banerjee [(2001) 6 SCC 16: 2001 SCC (Cri) 960], it was held: (Ruma Pal, J. at SCC pp. 24-25, paras 22-23)

“22. Because both Sections 138 and 139 require that the court ‘shall presume’ the liability of the drawer of the cheques for the amounts for which the cheques are drawn, … it is obligatory on the court to raise this presumption in every case where the factual basis for the raising of the presumption had been established. ‘It introduces an exception to the

general rule as to the burden of proof in criminal cases and shifts the onus on to the accused.’ … Such a presumption is a presumption of law, as distinguished from a presumption of fact which describes provisions by which the court ‘may presume’ a certain state of affairs. Presumptions are rules of evidence and do not conflict with the presumption of innocence, because by the latter, all that is meant is that the prosecution is obliged to prove the case against the accused beyond reasonable doubt. The obligation on the prosecution may be discharged with the help of presumptions of law or fact unless the accused adduces evidence showing the reasonable possibility of the nonexistence of the presumed fact.

23. In other words, provided the facts required to form the basis of a presumption of law exist, no discretion is left with the Court but to draw the statutory conclusion, but this does not preclude the person against whom the presumption is drawn from rebutting it and proving the contrary. A fact is said to be proved when, ‘after considering the matters before it, the court either believes it to exist, or considers its existence so probable that a prudent man ought, under the circumstances of the particular case, to act upon the supposition that it exists.’ Therefore, the rebuttal does not have to be conclusively established but such evidence must be adduced before the court in support of the defence that the court must either believe the defence to exist or consider its existence to be reasonably probable, the standard of reasonability being that of the ‘prudent man’.”

23. The respondent claimant has also referred to the decision reported as Mallavarapu Kasivisweswara Rao v. Thadikonda Ramulu Firm [(2008) 7 SCC 655], wherein it was observed: (SCC p. 660, para 17)

“17. Under Section 118(a) of the Negotiable Instruments Act, the court is obliged to presume, until the contrary is proved, that the promissory note was made for consideration. It is also a settled position that the initial burden in this regard lies on the defendant to prove the non-existence of consideration by bringing on record such facts and circumstances which would lead the court to believe the non-existence of the consideration either by direct evidence or by preponderance of probabilities showing that the existence of consideration was improbable, doubtful or illegal.”

24. This decision in Mallavarapu Kasivisweswara Rao case [(2008) 7 SCC 655], then proceeded to cite an extract from the earlier decision in Bharat Barrel & Drum Mfg. Co. v. Amin Chand Payrelal [(1999) 3 SCC 35]: (SCC pp. 50- 51, para 12)

“12. Upon consideration of various judgments as noted hereinabove, the position of law which emerges is that once execution of the promissory note is admitted, the presumption under Section 118(a) would arise that it is supported by a consideration. Such a presumption is rebuttable. The defendant can prove the non-existence of a consideration by raising a probable defence. If the defendant is proved to have discharged the initial onus of proof showing that the existence of consideration was improbable or doubtful or the same was illegal, the onus would shift to the plaintiff who will be obliged to prove it as a matter of fact

and upon its failure to prove would disentitle him to the grant of relief on the basis of the negotiable instrument. The burden upon the defendant of proving the non-existence of the consideration can be either direct or by bringing on record the preponderance of probabilities by reference to the circumstances upon which he relies. In such an event, the plaintiff is entitled under law to rely upon all the evidence led in the case including that of the plaintiff as well. In case, where the defendant fails to discharge the initial onus of proof by showing the non-existence of the consideration, the plaintiff would invariably be held entitled to the benefit of presumption arising under Section 118(a) in his favour. The court may not insist upon the defendant to disprove the existence of consideration by leading direct evidence as the existence of negative evidence is neither possible nor contemplated and even if led, is to be seen with a doubt. The bare denial of the passing of the consideration apparently does not appear to be any defence. Something which is probable has to be brought on record for getting the benefit of shifting the onus of proving to the plaintiff. To disprove the presumption, the defendant has to bring on record such facts and circumstances upon consideration of which the court may either believe that theconsideration did not exist or its nonexistence was so probable that a prudent man would, under the circumstances of the case, shall act upon the plea that it did not exist.” Interestingly, the very same extract has also been approvingly cited in Krishna Janardhan Bhat [(2008) 4 SCC 54: (2008) 2 SCC (Cri) 166].

25. With regard to the facts in the present case, we can also refer to the following observations in M.M.T.C. Ltd. v. Medchl Chemicals & Pharma (P) Ltd.[(2002) 1 SCC 234: 2002 SCC (Cri) 121]: (SCC p. 240, para 19) “19. … The authority shows that even when the cheque is dishonoured by reason of stop-payment instructions by virtue of Section 139 the court has to presume that the cheque was received by the holder for the discharge, in whole or in part, of any debt or liability. Of course this is a rebuttable presumption. The accused can thus show that the ‘stop-payment’ instructions were not issued because of insufficiency or paucity of funds. If the accused shows that in his account there were sufficient funds to clear the amount of the cheque at the time of presentation of the cheque for encashment at the drawer bank and that the stop-payment notice had been issued because of other valid causes including that there was no existing debt or liability at the time of presentation of cheque for encashment, then offence under Section 138 would not be made out. The important thing is that the burden of so proving would be on the accused.”

26. In light of these extracts, we are in agreement with the respondent claimant that the presumption mandated by Section 139 of the Act does indeed include the existence of a legally enforceable debt or liability. To that extent, the impugned observations in Krishna Janardhan Bhat [(2008) 4 SCC 54: (2008) 2 SCC (Cri) 166] may not be correct. However, this does not in any way cast doubt on the correctness of the decision in that case since it was based on the specific facts and circumstances therein. As noted in the citations, this is of course in the nature of a rebuttable presumption and it is open to the accused to raise a defence wherein the existence of a legally enforceable debt or liability can be contested. However, there can be no doubt that there is an initial presumption which favours the complainant.

27. Section 139 of the Act is an example of a reverse onus clause that has been included in furtherance of the legislative objective of improving the credibility of negotiable instruments. While Section 138 of the Act specifies a strong criminal remedy in relation to the dishonour of cheques, the rebuttable presumption under Section 139 is a device to prevent undue delay in the course of litigation. However, it must be remembered that the offence made punishable by Section 138 can be better described as a regulatory offence since the bouncing of a cheque is largely in the nature of a civil wrong whose impact is usually confined to the private parties involved in commercial transactions. In such a scenario, the test of proportionality should guide the construction and interpretation of reverse onus clauses and the defendant-accused cannot be expected to discharge an unduly high standard or proof.

28. In the absence of compelling justifications, reverse onus clauses usually impose an evidentiary burden and not a persuasive burden. Keeping this in view, it is a settled position that when an accused has to rebut the presumption under Section 139, the standard of proof for doing so is that of “preponderance of probabilities”. Therefore, if the accused is able to raise a probable defence which creates doubts about the existence of a legally enforceable debt or liability, the prosecution can fail. As clarified in the citations, the accused can rely on the materials submitted by the complainant in order to raise such a defence and it is conceivable that in some cases the accused may not need to adduce evidence of his/her own.

13. Thus once the complainant establishes the factual basis of existence of a legally recoverable debt it is obligatory on the Court to raise the presumption under Section 118 NI Act whereafter the onus shifts to the accused to rebut the same by preponderance of probability whether by leading defence evidence or on the evidence led by the complainant itself.

14. By examining Devender Singh the complainant has proved the source of money available to him and merely because the sale deed was not exhibited by Devender Singh is no ground to come to the conclusion that factual basis for establishing the legal liability has not been discharged. In his cross-examination complainant admitted that he was a stock broker and presently unemployed. The loan of ₹14,40,000/- was given in cash and he had not shown the same in the Income Tax Return. The same was not withdrawn from any account. He volunteered that he sold a property which was given as a gift to him by his uncle and from the said money he gave the loan to the accused. He admitted that there was no loan agreement between himself and Mr. Sushil Kumar.

15. Learned counsel for the respondent challenging the text message where he admitted the liability to pay submits that since no certificate under Section 65B of the Indian Evidence Act was produced the same could not have been used in evidence against him.

16. Complainant tendered his evidence by way of affidavit and the text message was marked as Mark-‘A’ on 17th September, 2014. As per the original record though initially mark Ex.CW-1/7 was put on it however, later as noted in the evidence of the complainant on 17th September, 2014 it was only a marked document. Though the SMS was marked as mark ‘A’ however, in his deposition as DW-1 Santosh Kumar Singh admitted that the SMS mentioned in para-8 of Ex.CW-1/7 to the complainant was sent by him. Having admitting sending the SMS there was no requirement by the appellant to prove the same. Para-8 of the post summoning evidence on behalf of the complainant by way of affidavit reads as under: “8. That, the deponent further says that in the meantime, the accused had sent SMS message dated 28.08.2013 at 22:06:43 from his mobile No.9818881486 to the deponent thereby admitting his liability towards the deponent which is exhibited and marked herewith as Mark CW1/7 and exact text of the SMS dated 28.08.2013 is reproduced hereinbelow for kind perusal of this Hon’ble Court: “Bhai kya karu samajh nhi aa rha, sab kuch thik hai but payment hath main nhi ruk rhi, nove main bhai ki shadi bhi hai usme kam se kam mera 1 lakh ka kharcha hai but 1 paisa hath main nhi hai, but main routine bna rha hu kuch din main ho jayga, ek kameti dal rhi hai 15 lakh ki wo utha kar de dunga, aisa nhi hai ki main kuch aapke bare main soch nhi rha but bhai kasam se main apne upar 1 rupya kharch nahi kar rha, sirf daru kai hi piase nikal pata hu”

17. Relevant portion of the cross-examination of DW-1 in this regard is: “It is correct that I have sent the SMS mentioned in para 8 of Ex.CW1/7 to the complainant. I do not remember if I had sent the said SMS just after dishonor of the cheque in question. I had received legal notice from the complainant but I did not replied to the same. The complainant used to visit my office for parties on regular basis. I had perhaps given 2-3 blank signed cheques as security to the complainant. I had given different security cheques for different committees being run by the complainant. It is wrong to suggest that I am deposing falsely”.

18. In case the blank signed cheques were given as security there was no question of the liability to pay as admitted in the SMS as also in the deposition. In view of the admission of the respondent and the fact that the cheque was signed by him even though he gave a blank signed cheque, the learned Trial Court committed an error in not considering this admission of the respondent on oath.

19. Learned Trial Court ignored this admission in the deposition of the respondent. In view of the discussion aforesaid, decision of the learned Trial Court acquitting the respondent for offence punishable under Section 138 NI Act is perverse and liable to be set aside. Respondent is therefore, convicted for the offence punishable under Section 138 NI Act.

20. List on 28th September, 2018 for hearing the parties on the order on sentence.

JUDGE SEPTEMBER 12, 2018 ‘vn’

Brijesh Kumar v. Santosh Kumar Singh

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